Bill Johnson's exit threatens Duke Energy's credit rating

One of the leading Wall Street credit firms placed Charlotte-based Duke Energy on a watch list for a potential downgrade in the wake of the sudden departure of Bill Johnson, who was slated to be CEO of the company after it merged with Raleigh-based Progress Energy.

Standard & Poor's Financial Services made its "CreditWatch Negative" announcement on July 4 when the stock markets were closed. S&P cited "negative implications in response to the abrupt change in executive leadership" made right after the merger closed on Monday afternoon.

S&P will next make a decision whether to downgrade Duke from A- to BBB+ or keep the current rating unchanged. A downgrade would potentially increase the interest rates at which Duke borrows money.

"The sudden shift in management raises concerns about effective corporate governance, successful handling of the anticipated merger integration, and the ongoing effective management of pending challenges that face the combined entity," said S&P credit analyst Dimitri Nikas in the statement.

Translation: Johnson's abrupt departure threatens the status of formerly Progress executives who have suddenly lost their patron and protector.

Corporate mergers are known to trigger power struggles and turf battles among executive ranks fueled by outsized ambitions for power and money. Analysts are concerned that Johnson's departure could cause internal turmoil and distractions from the company's mission.

Duke said Tuesday morning that Johnson left the company by mutual agreement. Johnson had been CEO of Progress for five years and was to be CEO at Duke after the merger, creating the nation's largest electric utility. His departure shocked employees and dismayed state regulators who had approved the merger on the understanding that Johnson would head the combined company.

To many Johnson's exit increasingly looks like a palace coup in which other ex-Progress executives could depart or be pushed out. However, Duke has offered assurances that all the ex-Progress executives have safe jobs if they want them.

S&P also put Duke's subsidiaries, including Progress Energy, on CreditWatch with negative implications.